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Hong Kong's cartel cop sees staff exits as it fights for change

Mon, Jul 17, 2017 - 10:15 AM

It took 10 years of talks for Hong Kong to pass an antitrust law. But about 18 months after it took effect, the city's Competition Commission has seen multiple senior departures as it battles to change a culture of price controls and quasi-legal cartels.

PHOTO: AFP

[HONG KONG] It took 10 years of talks for Hong Kong to pass an antitrust law. But about 18 months after it took effect, the city's Competition Commission has seen multiple senior departures as it battles to change a culture of price controls and quasi-legal cartels.

Since it started hiring in 2014, the regulator is on its third chief economist, seen its executive director for operations and its general counsel leave, and in September will welcome its third chief executive. Rank and file employees have also departed, a former staffer said.

While agency officials say staff turnover is common at a new regulator and point to actions they've taken to enforce the new rules, the exits add to the demands facing incoming head Brent Snyder. The former US Justice Department prosecutor will not only be expected to tackle antitrust issues in a city that operated for 150 years without any cross-sector competition rules, but also ensure there's stability at the commission.

"Bringing together the right blend of competition law and Hong Kong legal expertise in one team was always going to be challenging," said Adam Ferguson, a competition lawyer with Eversheds LLP in Hong Kong. "I expect this will continue to be one of the key challenges." Companies in Hong Kong have long engaged in price agreements and sharing information. The agency has said such conduct hurts consumers: it found in May that gas stations in the city operated a "complex and opaque" discount system that made it difficult to compare prices. Such practices are so ingrained that before the antitrust law came into effect industry officials would meet with the commission's current CEO Rose Webb and openly describe their price-fixing and cartel deals. The ability to set prices was essential to their business needs, they said, according to Ms Webb.

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It will take time for the commission's education and investigation efforts to affect such business practices, said lawmaker Lam Cheuk-ting, who also lobbies against bid-rigging in the construction sector.

The employee exits haven't deterred the commission from trying to change how companies operate, Webb said in an interview in her office. She highlighted successes such as complaints from firms that rivals were now discounting, and said her international counterparts have noted the speed with which the regulator has acted. The commission sued five information technology firms in March for rigging a contract bid for a charity, its first court case.

Some successes have come without the need for litigation. In November the regulator directed the Hong Kong Institute of Architects and Hong Kong Institute of Planners to amend their codes of conduct, which restricted members from setting their own fees, while the Hong Kong Newspaper Hawker Association withdrew guidance it issued on cigarette pricing after meeting with commission officials.

The agency is assessing 130 complaints and actively investigating about a dozen cases in sectors including retail, construction and financial services, said Ms Webb, without providing details.